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Profit Margin



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amother


 

Post Tue, Dec 09 2014, 10:36 pm
How do I calculate what my profit margin should be?
I know all industries are different so this is for low end stationery supplies.
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seeker




 
 
    
 

Post Tue, Dec 09 2014, 10:53 pm
Are you sure there's even a market for that? Don't people usually just buy their stationery supplies from Office Depot or whatever?
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amother


 

Post Tue, Dec 09 2014, 11:44 pm
seeker wrote:
Are you sure there's even a market for that? Don't people usually just buy their stationery supplies from Office Depot or whatever?

Op here
yes, I've done my research.
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kb




 
 
    
 

Post Tue, Dec 09 2014, 11:49 pm
Seriously no offense... but if you don't know what the profit margin should be, you clearly didn't do enough research yet!
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amother


 

Post Tue, Dec 09 2014, 11:58 pm
kb wrote:
Seriously no offense... but if you don't know what the profit margin should be, you clearly didn't do enough research yet!

knowing that there's a need for something and actually filling that need requires different research. I know there's a need for what I'm looking into filling. Now, I'm up to the next step of how to get the product, how to go about doing what I want to with it..... and in that is also knowing what a reasonable profit margin would be.
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Sherri




 
 
    
 

Post Wed, Dec 10 2014, 12:01 am
What are your objectives? Is this going to be a premium-priced product line for customers looking for luxury stationery items?

edited for spelling


Last edited by Sherri on Wed, Dec 10 2014, 12:14 am; edited 1 time in total
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Sherri




 
 
    
 

Post Wed, Dec 10 2014, 12:02 am
(Have you Googled for this info? There is a tremendous amount out there.)
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amother


 

Post Wed, Dec 10 2014, 12:17 am
Sherri wrote:
What are your objectives? Is this going to be a premium-priced product line for customers looking for luxury stationary items?

It's not a luxury product. For the demographic I am targeting it is a necessity. I want to keep it low end and cheap but at the same time not cut myself short.
I did look online but like you said there's lots of information out there and I was looking for help from people that might be in retail or similar kind of business.
This is a one-of-a-kind business, and am positive that there is no such thing in my area so noone has to worry about helping a competitor.
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Mrs Bissli




 
 
    
 

Post Tue, Dec 16 2014, 4:37 pm
Answering OP's original question. (I don't personally think there's need to be that snarky, it's a good question.)

There are several different definition of profit margin. The main ones you may want to focus on are gross margin and operating margin (aka EBIT margin).

Gross margin = Gross profit/Sales %
(Gross profit is Sales - Cost of Goods Sold).
This shows how profitable the business is BEFORE misc overhead.

Operating margin = Operating profit / Sales %
Operating profit further deducts sales & marketing expenses, admin expenses
things like rents from the gross profit. Usually this is BEFORE deducting
financing expenses (eg loan interests) and taxes (though sales tax and VAT
are usually adjusted at gross profit level.)

Usually distribution businesses have thinner margins than manufacturing products on your own.
Some businesses may have high gross margins but much lower operating margins if they require
high marketing costs (eg branded goods or cosmetics).
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amother


 

Post Tue, Dec 16 2014, 4:38 pm
Mrs Bissli wrote:
Answering OP's original question. (I don't personally think there's need to be that snarky, it's a good question.)

There are several different definition of profit margin. The main ones you may want to focus on are gross margin and operating margin (aka EBIT margin).

Gross margin = Gross profit/Sales %
(Gross profit is Sales - Cost of Goods Sold).
This shows how profitable the business is BEFORE misc overhead.

Operating margin = Operating profit / Sales %
Operating profit further deducts sales & marketing expenses, admin expenses
things like rents from the gross profit. Usually this is BEFORE deducting
financing expenses (eg loan interests) and taxes (though sales tax and VAT
are usually adjusted at gross profit level.)

Usually distribution businesses have thinner margins than manufacturing products on your own.
Some businesses may have high gross margins but much lower operating margins if they require
high marketing costs (eg branded goods or cosmetics).

Thank you
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